The Trump administration deferred more than $1 billion in federal Medicaid payments to California and Minnesota on Tuesday, July 21, while reviewing claims it considers high-risk. Health and Human Services Secretary Robert F. Kennedy Jr. announced the action in Washington with Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz.
CMS is holding about $867.5 million from California and $199 million from Minnesota. The agency described the action as temporary federal payment deferrals, not permanent funding cuts.
Both states can submit additional documents supporting the disputed claims. Federal officials have not announced a deadline for completing the reviews or releasing any approved funds.
A deferral delays federal matching reimbursements while officials seek more records. It does not establish fraud or automatically disqualify the underlying services. CMS may approve all or part of the claims, continue withholding funds, or pursue repayment if it finds violations.
Kennedy said the states must show that the payments comply with Medicaid requirements. Oz said CMS wants to stop questionable spending before federal money leaves the government.
California Home-Care Claims Under Review
The California review focuses on claims involving certain in-home care programs. CMS said spending growth exceeded national trends and some claims lacked enough supporting documentation.
Federal officials did not identify specific providers accused of wrongdoing. Kennedy and Oz presented no supporting evidence of fraud in the newly deferred claims.
California’s In-Home Supportive Services program pays caregivers who assist older adults and people with disabilities. Services can include bathing, cooking, shopping, cleaning and transportation to medical appointments.
The program serves about 900,000 residents who may otherwise need institutional care. California officials say its growth reflects higher enrollment, rising wages and increased care needs.
CMS previously announced a separate $1.3 billion California Medicaid deferral in May. About $1.1 billion of that action involved home and community-based services.
Oz said California’s home-care spending had grown faster than spending in other states. He asked the state to explain the patterns before CMS released the federal share.
Gov. Gavin Newsom’s office rejected the suggestion that program growth demonstrated fraud. It said California was keeping more residents outside costlier nursing facilities.
State Medicaid Director Tyler Sadwith also defended the spending increase. California’s caseload rose 17.5% between 2023 and 2025, while average hourly caregiver wages increased from $19 to $21.
California officials say the state uses annual assessments, electronic timesheets and verification systems to check services. The state has not announced immediate reductions in coverage tied to Tuesday’s action.
Minnesota Faces Another Deferral
CMS reviewed claims from 14 Minnesota service categories identified as vulnerable to improper billing. The agency said some expenditures involved providers flagged during program-integrity reviews.
Other questioned claims may involve eligibility or billing concerns. CMS has not released a complete list of the providers or transactions under examination.
Tuesday’s action adds $199 million to an expanding dispute between Minnesota and federal health officials. The administration had already announced an earlier Minnesota payment pause involving $259.5 million in February.
That February total included about $244 million in unsupported or potentially fraudulent claims. Another $15 million involved beneficiaries whose immigration eligibility required additional review.
Minnesota Gov. Tim Walz called the earlier action political retaliation. He warned that withheld funds could affect families, veterans, people with disabilities and healthcare providers.
CMS gave Minnesota 60 days to propose and begin a corrective plan after the February decision. The state submitted a plan and strengthened oversight, but the earlier money had not been fully released.
Minnesota has frozen new provider enrollments in several high-risk service categories. State officials have also expanded screening and sought records needed to support questioned claims.
Fraud cases involving Minnesota-administered programs have increased federal scrutiny. Those prosecutions and investigations do not prove that every Medicaid claim now under review was improper.
Federal Fraud Enforcement Expands
Kennedy also announced broader authority to exclude individuals and organizations from federal healthcare programs. CMS and the HHS inspector general could permanently bar some participants found responsible for misconduct.
The administration has made healthcare fraud enforcement a central federal priority. Vice President JD Vance has worked with Kennedy and Oz through an anti-fraud campaign created by President Donald Trump.
Medicaid provides health coverage to eligible low-income adults, children, pregnant women, older adults and people with disabilities. States administer the program, while federal and state governments divide its costs.
A federal deferral can strain a state budget because states often pay providers before seeking matching funds. Longer reviews may force states to use additional money while reimbursement remains unresolved.
The latest action does not automatically end Medicaid coverage in either state. CMS also has not ordered providers to stop delivering approved services.
The financial effect will depend on the review’s length and each state’s response. California and Minnesota must now provide records showing that the questioned payments meet federal standards. State officials may also challenge any final federal determination in court.
CMS had not published a claim-by-claim breakdown by Tuesday evening. The combined $1.0665 billion remains deferred while federal reviewers examine documentation from both states.
